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1THE CURRENT ECONOMIC SITUATION AND THE CHALLENGES— Decisive vote for change represents the desire of the people to grow, free themselvesfrom the curse of poverty and use the opportunity provided by the society. Country inno mood to suffer unemployment, inadequate basic amenities, lack of infrastructureand apathetic governance.— Challenging situation due to Sub five per cent growth and double digit inflation.— Continued slow-down in many emerging economies a threat to sustained global recovery.— Recovery seen with the growth rate of world economy projected at 3.6 per cent in2014 vis-à-vis in 2013.— First budget of this NDA government to lay down a broad policy indicator of thedirection in which we wish to take this country.— Steps announced are only the beginning of the journey towards a sustained growth of7-8 per cent or above within the next 3-4 years along with macro-economic stabilization.— Growing aspirations of people will be reflected in the development strategy of theGovernment led by the Prime minister Shri Narendra Modi and its mandate of “Sab kaSaath Sab ka Vikas”.— Need to revive growth in manufacturing and infrastructure sectors.— Tax to GDP ratio must be improved and Non-tax revenues increased.Deficit and Inflation— Decline in fiscal deficit from 5.7% in 2011-12 to 4.5% in 2013-14 mainly achievedby reduction in expenditure rather than by way of realization of higher revenue.— Improvement in current account deficit from 4.7 % in 2012-13 to year end level of1.7% mainly achieved through restriction on non-essential import and slow-down inoverall aggregate demand. Need to keep watch on CAD.— 4.1 per cent fiscal deficit a daunting task in the backdrop of two years of low GDPgrowth, static industrial growth, moderate increase in indirect taxes, subsidy burdenand not so encouraging tax buoyancy.Key Features of Budget 2014-20152— The government is committed to achieve this target. Road map for fiscal consolidationoutlines fiscal deficit of 3.6 % for 2015-16 and 3 % for 2016-17.— Inflation has remain at elevated level with gradual moderation in WPI recently.— The problem of black money must be fully addressed.— Bold steps required to enhance economic activities and spur growth in the economy.Administrative Initiatives— Sovereign right of the Government to undertake retrospective legislation to be exercisedwith extreme caution and judiciousness keeping in mind the impact of each such measureon the economy and the overall investment climate.— A stable and predictable taxation regime which will be investor friendly and spur growth.— Legislative and administrative changes to sort out pending tax demands of more than` 4 lakh crore under dispute and litigation.— Resident tax payers enabled to obtain on advance ruling in respect of their income-taxliability above a defined threshold.— Measures for strengthening the Authority for Advance Rulings.— Income-tax Settlement Commission scope to be enlarged.— National Academy for Customs & Excise at Hindupur in Andhra Pradesh.— The subsidy regime to be made more targeted for full protection to the marginalized,poor and SC/ST.— New Urea Policy would be formulated.— Introduction of GST to be given thrust.— High level committee to interact with trade and industry on regular basis to ascertainareas requiring clarity in tax laws is required to be set up.— Convergance with International Financial Reporting Standard (IFRS) by Adoption ofthe new Indian Accounting Standards (2nd AS) by Indian Companies.— Setting up of Expenditure Management Commission to look into expenditure reforms.— Employment exchanges to be transformed into career centres. A sum of ` 100 croreprovided .3ECONOMIC INITIATIVESForeign Direct Investment (FDI)— Government to promote FDI selectively in sectors.— The composite cap of foreign investment to be raised to 49 per cent with full Indianmanagement and control through the FIPB route.— The composite cap in the insurance sector to be increased up to 49 per cent from 26per cent with full Indian management and control through the FIPB route.— Requirement of the built up area and capital conditions for FDI to be reduced from50,000 square metres to 20,000 square metres and from USD 10 million to USD 5million respectively for development of smart cities.— The manufacturing units to be allowed to sell its products through retail including Ecommerceplatforms.Bank Capitalization— Requirement to infuse `.2,40,000 crore as equity by 2018 in our banks to be in linewith Basel-III norms— Capital of banks to be raised by increasing the shareholding of the people in a phasedmanner.PSU Capital Expenditure— PSUs will invest through capital investment a total sum of ` 2,47,941 crores in thecurrent financial year.Smart Cities— A sum of ` 7060 crore is provided in the current fiscal for the project of developing“one hundred Smart Cities’Real Estate— Incentives for Real Estate Investment Trusts (REITS). Complete pass through for thepurpose of taxation.— A modified REITS type structure for infrastructure projects as the InfrastructureInvestment Trusts (INVITS).— These two instruments to attract long term finance from foreign and domestic sourcesincluding the NRIs .